i am not sure what caused the last downturn with the dow but calf can will know. see you back here for the fox reason at 7:00 eastern. >>neil: thank you. welcome to october. the chinese have hacked their way all the way to the white house. welcome, everyone. i am neil cavuto. heal ween could be 30 days away, but this is scary today. chinese hackers breaching a white house computer. no harm done the white house says. no classified information compromised. however, we will have more on this from the white house but the very fact the chinese hackers got as far as they did has security experts worried. very worried. for two years, it has been an on secret that china has has been

phishing u.s. corporate secrets. this takes it to a whole new level. an expert on all these china says this doesn't only prove how brazen the chinese are, but how unprepared we are. good to see you. hacking a computer isn't rocket science. getting to the level of the white house is noteworthy. >>guest: will, they went into the military office, that is the one responsible for keeping america's nuclear launch codes. they could compromise those, we would be in a real world of hurt. you are right, they have gotten so far. part of the reason is because attackers normally have an advantage. that element is, for years we have been afraid to acknowledge that the chinese have been behind unprecedented series of attacks not only for espionage but also to try all sorts of other things. if we are not willing to have the honest conversations with the chinese and with ourselves,

of course we can't do very much to protect american networks. >>neil: but we are afraid of the chinese they own so much our debt. companies want to be often their good side and expanding to china, so, we just turn the other cheek? >>guest: we can't. this is now gotten to a whole new level. it is worrisome because of the nuclear launch codes and this is the president, the president's travel arrangements and communications on air force one, the office that is responsible for making sure he stays in touch with the american military. that means our security. >>neil: a lot of security experts say that is what they it is interrupt the system, hack into it without necessarily disrupting it. in other words, without getting codes, without getting the president's schedule, just enough to as if someone sent you a virus plagued e-mail, you touch it and open it your computer goes down. >>guest: that is what they think today.

what they will not know is how far the chinese got. the chinese have shown in other attacks they have been able to get in and out and not be detected for quite some time. >>neil: you mentioned brazen and you mentioned there could be a method to this, what seems to be espionage madness, china is in trouble. what do you mean? >>guest: they are going east rails. if you look at electricity production, manufacturing surveys, price indices, the economy is growing at 1 percent or 2 percent, maybe 30 percent but not the 7.6 percent that beijing claims. you have a political transition that is in real trouble with all of the intense infighting. you have a military breaking free of civilian control. >>neil: well, you are saying the growth is less than we are told, much less. >>neil: what do you think? >>guest: it is about zero. maybe one or negative one. it used to a world economic

tiger but now the growth model is incompatible with today's global environment so the export-led investment heavy model is not working. they did not make the change to consumption five years ago when they could have started it now they can't do it because the economy is in such distress. >>neil: are you saying desperate times call for this behavior? >>guest: they are trying to distract chinese people from what going open. the first two weeks this month, the next leaders of china is missing from public and the state media is quiet but at the same time the state media ramps up the propaganda against japan regarding the islands to deflect the attention of the chinese people. this is the political organization that's primary basis of legitimacy is the continuing delivery of prosperity. when it cannot do that it falls on nationalism which brings it in conflict with countries in the region and the united states. many of those countries are our

allies or friends. >>neil: if the emperor has no clothes he is desperate? >>guest: yes, we have seen this in other countries and china. there are a lot of things going in the wrong direction and we are not really trying to acknowledge that. we are not averaging that, therefore, we are creating the conditions where this could be worse. >>neil: gordon, thank you, i think. the expert on china warned about this long before anyone knew about it. ed henry is following the president in las vegas on how the white house is dealing with the cyber attacks they are not making a big deal of it, right? >>guest: they trying to tamp it down by saying that no classified information was accessed by the chinese. the fact of matter is this was an attack and the administration is not denying that. they are just trying to say it turned out to be non-that big --

not that big of a deal. here is a statement from a senior official: this was a pure phishing attack against an unclassified network. we have mit station measures in place. in this instance the attack was identified. the system was isolated. there is no indication whatever that any breach of data or breach of classified system." you can see the white house, really, zeroing in on that point, that classified information was not involved at least in this instance. he is where it is a big deal, a way that romney is trying to keep the race close he is charging that president is not tough enough pushing back against china, largely on trade issues a separate issue of trade matters. the white house is pushing back on that, and the president has shown that he is taking action against china in terms of

dumping cheap cars and auto parks and other things that can affect jobs in states like ohio. but mitt romney is saying it is too little, too late. obviously the white house doesn't want this close to the election to see some sort of a security breach. that is why they are making clear that no classified information was taken here. >>neil: thank you, ed henry, from las vegas. >> now, five weeks ahead of the election you may want to hear this next story. i've been a superintendent for 30 some years at many

different park service units across the united states. the only time i've ever had a break is when i was on maternity leave. i have retired from doing this one thing that i loved. now, i'm going to be able to have the time to explore something different. it's like another chapter.

>>neil: thousands of lay off notices will set workers hands days out of the election. the white house telling the defense contractors to hold off on the pink slip warnings and any legal costs they incur will be covered. today we are learning that lockheed and another against

firm are listening. now, what is the heck is going on? these are part of the planned sequestration defense-related cuts in the works and they will happen. by obligation, you have to remind the employees affected that they will be affected. now, you don't have to. >>guest: the law says you must give two months notice. that would be the friday before election day. the administration doesn't want the lay off notices so earlier this year, this summer, they said the defense contractors, lockheed market, you don't need to send the notices and look heed said i am not seeing a lost specifics as far as preventing us from going forward with not doing it so on friday the administration offered to pick up the liability because this is the law as well as the costs of limiting the guys go if the

layoffs happen. this is a lost deal making, a lot of politics in this situation because the defense contractors big in virginia which is a battle ground state. >>neil: can they do that? is that legal? >>guest: well, republicans say no, republicans are saying the white house is playing politics with this. the g.o.p. is going to go on the offense on the sequester. they note that the house republicans have passed a plan that would hold off the cuts and would replace them with other cuts. the administration has not adopted a specific plan. there has been speculation they would embrace a democratic proposal offered by a maryland congressman but they have not formally embraced that. this is becoming a political hot potato. it was set up in a debt deal set up by the super committee's failure and now we are looking at cuts january 2nd which everyone agrees would be devastating especially for defense contractor jobs >>neil: how many jobs are we

talking about? >>guest: there have been estimates of 125,000 or in that change. no one truly knows because the administration has laid out their plan should the sequester go into effect but there have been a lot of estimates and the defense contractors are saying if you are going to cut that much, $500 billion or $600 billion of defense spending that will affect their contracts which would affect federal employees. this is no doubt this would cost jobs and this is going to be, this is what the election is about, what the buying is. >>neil: we call the nlrb, and we called the white house for a statement, and nothing from either. the folks affected by this, and the fact that everything is up in the air with the sequestration, they are well aware of what could happen? >>guest: they are. you have to formally tell them when mass layoffs occur, you

have to tell them and that is what the administration is saying you don't have to do in this situation. the biggest issue, the biggest scar -- carrot they offered, lockheed was worried because the law says they have to do it and they are not on the hook for any legal challenges if sequestration goes into affect. >>neil: you have heard that the president is ahead in swing states. has anyone bothered to ask who heads up the swing states? most of them are republicans. more on that ahead. ♪

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>>neil: get ready to be shook

up. in two days from now the first of the presidential debates occur. what is the connection between the debates and the belly dance increasing i have no idea. but i tell you what, you will be shaking watching our coverage. it begins, of course, wednesday night in denver and continues all four debates not only 4:00 p.m. eastern on fox but from 8:00 p.m. through midnight. we really "shake things up," which is where i was going. she could come back and appear on any or all of the specials we are planning. >> now a swing state that could decide the election. florida is run by my next guest, a republican, which could be good for the democrat incumbent because florida's economy has been on a very noted turn around, unemployment is falling,

more people are working, the real estate prices there seem to be reverseing. the man that made it happened elected in 2010, and what he makes of the polls that show president obama is benefiting from all your hard work. >>guest: my daughter and my wife took belly dancing so that was fund -- fun to watch. here is what is happening. the race will come down to one thing, if governor romney explains that his plan to get jobs going is no different than my race in 2010. all i talked about what i would do to turn the economy around. it worked. unemployment has dropped faster than any other state. down 2.3 percent. last month, we were second to texas in job creation. my competition is governor perry. if he talks jobs, governor romney, he will do well.

that is the biggest issue in our country. clearly, it is an issue in florida. we have done well but we still have people unemployed. a lot better than what we were but we still have a lot of work. >>neil: you reminded me at the convention and other times we have chatted, polls are fleeting and fickle. but it is interesting to me that in some of the states, swing states, the president made inroads and it could change over night. if -- in ohio, in michigan, in wisconsin, all the republican governors, all practicing turn arounds, all utilizing policies that would appear to be anathema to president obama but now the benefit seems to go to...president obama. >>guest: it is incumbent upon governor romney to talk more about what he will do on jobs. whatever the issue is, if you talk to -- i go out all the time and listen to the people around the state. two things in our state: they

want their child to get a great education because you carry about the american dream. two, you want to get a job or keep your job. in the presidency what governor romney ought to talk about, near are the three steps, five steps, seven steps. >>neil: but say he goes do florida and says, look, look what governor scott has done. because of him, or whatever. or you go to he highway, look what the governor has done, and because of him we are turning things around. he is not doing that. many republicans have argued he is just handing more appear in addition to the president. and the president is benefiting from policies even you stated are not his policies. >>guest: i have never been involved in a presidential race so i don't know how hard it is to talk different in one state than the other so maybe it is too difficult. i don't know. what i do is, i say we have done well, although we have a lot of

work to do. if we want to do better we need to have the federal government do what other governors have done, reduce taxes, regulation, do what perry has done. he taxes low. reduce regulations. streamline permitting, and like business people. >>neil: you are dismissing this argument, but, if you follow this out by sting, governor, say the president is re-elected and and it hangs on swinging states like yours where you have implemented policies that are not the president's policies but the mirror opposite. any lesson here for the president if he is re-elected over, then, the policies you would recommend? in that event? >>guest: well, whoever is elected i am hopeful for american families they will reduce taxes we cannot have the highest corporate tax rates and expect businesses to flop to

america or per regulation and expect businesses to flop to america. >>imus: what on the tax thing when mitt romney said last week i will lower taxes but it is not what it seems, i will take away a lot did yous and exemptions and people thought, well, maybe you are not all we thought you were, and he got in trouble >>guest: we are competeing. our businesses are competing with businesses around the world. we have to look at what are the canadian taxes? the european taxes? the tacks in -- tax in vietnam in when you shop you do fault say i will only buy that if it is made in america. if we want our economies to succeed they have to compete with vietnam companies. >>neil: but if he is saying that i am going to lower taxes but it may not be what it

appears because i will take away breaks which is fine for simplified tax code, et cetera, does he risk alienating a base that did not trust him? that he was serious about the big reagan-like cut in taxes. >>guest: my discussions is he understands we are competing and he knows we have to reduce our taxes. >>neil: who was he reaching out to? >>guest: you have to ask him. >>neil: independent voters? >>guest: he understands we are competing and he understands we have to have he we are taxes. if we have more jobs in america, and we want american businesses to do well, we have to is lower taxes than the rest of the developed world. if we don't, brings are going to go out of this country. >>neil: as a former health care executive there is always a learning curve for executives who become, then, governors, senators, representatives, but

you are an executive as governor. what recommendation could you offer mitt romney if he becomes president of the united states in he learned a little bit as governor massachusetts but what would you tell him? >>guest: it is similar to do well you have to talk to a lot of people and listen to a last people. it is different you have a house of representatives and a senate and way more media. way more media attention. the biggest difference is the media. how much you have. you go out and listen to people. you try to bring people together. again, you don't waiver from what you believe. lower taxes and things like that. bring people together and see if you can solve things that way. >>neil: governor scott of florida, thank you. tonight on fox business network, one party in particular seeing a drop in voter registration across the swing state. find out which party it is and which guy could get a boost from it at 8:00 p.m. eastern, fox business network. i know you could watch o'reilly, i am telling you the show

repeats, like, 90 times. just watch us. next time you fly, are terror threats taking a back seat to just seats? does your phone give you all day battery life ?

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unhinged. former transportation inspector general is here and whether maintenance on planes is becoming unhinged. that would be disconcerting if you are in a row and the comes up and. it does get back to this issue, are the planes really being maintained to the degree they should? >>guest: again, it depends on the airline. american airlines is if a perfect storm on maintenance. they are in bankruptcy, the f.a.a. is watching them, or supposed to be watching them more closely. they have the oldest fleets in the industry. last year, they were fined $152 million for maintenance violations. now they are going do lay off maintenance people, they are in a tough situation. it is disconcerting. >>neil: is this a parallel say, between, seats not buckled in and bolted in and how safe they are, period? >>guest: well, yes, there is a

huge issue on that. over the years, the federal aviation regulations have required seats to be more and more robust, more strengthening, bets are bolted to the floor. they are not bolted down and they can collapse on each other, and at least if an accident or hard landing or crash sequence people can be killed literally by the collapsing of the seat. >>neil: i think it is bigger than the seats. i fear it could be. it is maintenance that such and some things are compromised. maybe there is a lot more we don't know. >>guest: that is right. maybe the seats are a symptom that is giving someone a wake-up call. american airlines was the subject of an in-depth investigation by my old office, the office of inspector general, back in 2010. they had alarming reports that american was not accomplishing the required maintenance inspections. there were problems with the maintenance. that seems to be echoed in the fact they were fined $152

million last year for maintenance. they are saying they will move out of what is left inhouse, they will move out 35 percent of their maintenance to outsourcing which the f.a.a. has said they cannot police as well as inhouse maintenance. they do have some alarm willing trends. >> do you think it is a good idea, and i don't wish ill on carriers with maybe disputes but those embroiled in such, should you avoid them because the people are angry and not happy, they will not give their job 100 percent but you could have pause, and you should avoid the carriers in the middle of the disputes? >>guest: absolutely. when you have maintenance issues, everyone has concern and are ill at east when there are reported maintenance issues. also, the on time arrival has fallen to 50 percent. the cancellations are up, perhaps up to 2 percent in the next month so there are many

reasons besides maintenance to collect another carrier but because i am concerned about the safety, the maintenance issues are alone enough to give me pause. it is a big issue. i hope the f.a.a. get on it. though need to call on the national team. they need to call in the team from washington, dc, from the f.a.a. >>neil: thank you. the health care law now telling hospitals to readmit medicare patients too soon and you could be getting fined real soon.

>>neil: a new segment we are kicking off looking at surprises tucked in the health care law. it is amazing what we come up with each day. of course, this rule is kicking in and it is getting a lot of attention. hospitals will now be fined for readmitting patients too soon. that is because they have been

warning folks about surprises like this. this means if a hospital lets a patients out too soon, the patient has to come back for complications or whatever, medicare will be on you. >>guest: this penalty is a scam. it is one of the many gimmicks in here to take health care dollars away from seniors and shift them for other uses. >>neil: would this ever be a good idea? >>guest: no. i will tell you why, today, for the first time, the administration is rewarding the hospitals that spend the least per senior and whacking with the merits the hospitals that provide more care for seniors. not only care in the hospital but also for the 30 days after a patient is discharged, the hospitals are punished if prescribing physical therapy for their hip replacement paints and their knee replacement patients or prescribing follow-up visits for heart patients. the idea that hospitals will be penalized for providing the care

that the seniors need is going to actually cost likes. >>neil: isn't the argue to make sure they don't goof the first time like some hospitals might with a sponge or syringe? if it means someone has to come back, you will pay. >>guest: the difference is that the government is forcing the hospitals to push the patients out too soon. if general motors were forced to take the cars off the assembly line before the tires are on then, well --. >>neil: i got a car like that once. >>guest: the fact is, an article came out last week showing that knee replacement patients are going back to the hospital too soon. they are having problems with their knew knees. that is because the hospitals are being forced under care square to discharge them too soon. >>neil: so we are getting rationed care. >>guest: absolutely. but it will be worse.

under this law, hospitals will have $247 billion less money over the next decade to care for the same number of seniors. it will amount to for the one in five seniors who need a lot of care, it will mean about $5,000 to $6,000 less care than otherwise they would get. >>neil: with the emphasis more on care for the young? >>guest: this law takes money away from medicare to fund entitlements for young people so nurses will be spread thinner and we know from the evidence it means that elderly parents are going to have a worse chance of actually surviving their hospital stay and going home again, 90 percent, for example, 90 percent higher risk of dieing from a heart attack in the hospital. >>neil: you have been warning us about this. we will bring this up a lot, some of the surprises tucked into this. >> now, allegations the government is using bonuses to

hide cuts to medicare advantage plans in the health care plan. republican congressman threatening to issue subpoenas, and is joining us right now. what is going on, congressman? >>guest: what is going on, through a back-door entitlement $8.3 billion is going to be spent backfilling money that according to the obamacare when passed should not be paid under a loophole that this is sort of experimental. what they are really doing is trying on the east of an election not to have seniors realize that the cuts to medicare advantage were real. what is important about this, the money they are taking, they are taking it out of nowhere. this is not appropriated money but money that bypasses congress and allows the secretary by call this what she is calling it, to spend $8.3 billion to basically buy an election the this is what happens when the heavy hand of government has the ability on

one happened, like the last interview, to dictate new finds, and on the other hand to take money out of the pockets of taxpayers without even the permission of congress. >>neil: this means that the price tag for the health care law, as it rolls out, is getting more pricey as the day goes on? >>guest: absolutely. if they do not have the fines they don't score on one side f they count the $8.3 billion, obamacare is $8.3 billion more negative during the first 10 years. that is on top of all the new scoring that came out of c.b.o. congressional budget office missed it. i don't know why. ultimately when they rescore it, obamacare becomes a bigger and bigger drain. it turns out you cannot insure 32 million more people for free. you just can't do it. the seniors are finding out right now. >>neil: obviously, i know you

wanted to see mitt romney elected president but to undo this you need a republican senate, right? without that, is it safe to say that the health care law will stand and will grow? >>guest: without a house, senate, and a president that want to actually drive down the things that cause health care to cost too much in this country, we are not going to get to afford am health care we call it obamacare, even the democrats but the fact is it was called the affordable health care act and it did nothing to make health care affordable but did a lost spending of other people's money on health care. that doesn't actually drive down the cost. to drive down the cost of health care, we have to deliver it intelligently and do some things that were in obamacare. quite frankly, we have to deal with the things that drive up the cost, trying to fine people for coming back to the hospital that incentivizes the hospitals

to send them out too soon. that sends a wrong message. it is not the doctors and hell indicator professionals making a fair evaluation but the heavy hand government. >>neil: thank you, mr. chairman, from washington, dc. the chairman keeps his eyes on capitol hill and "the five," have their sight on california. at a certain former governor. what do you have going? >>guest: we will talk about libya. we will talk about what is going on in afghanistan. then we will turn over to governor arnold schwarzenegger and his sordid love life and we will have a little fund with it. >>neil: do you get a sense that the book tour is working in >>guest: he will sell a lost books. it is so compelling. hannity will have him on. friend friend will have him in the morning, everyone wants to hear what he says. there has been more than one affair. who knows what else he will

break but the guy really is an interesting story. coming over here, doing the whole pumping iron thing, and various movies and what not so it is an interesting story. we have the perfect cast here, gutfeld,, dana is classy and part and conservative, andrea is miss october in the conservative magazine somewhere, and beckel, the guy who although smart, he is still a liberal. >>neil: indeed. any of those who you hate more than others? >>guest: i don't hate. this is like having dinner every night with your family and your best friends all at once. >>neil: there are many in my family i don't like truth be told. >>guest: there are times i don't like beckel for what he is saying. but he is a good guy in the end. >>neil: thank you, looking forward to it. >> the white house is asking taxpayers to lay out more cash

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>>neil: it has been three weeks, now, since the attack at our consulate in libya and the romney campaign is demanding answers saying the white house has yet to get the story straight as the administration pushes for half a billion in additional aid for egypt, another hot spot where our embassy was also attacked. my guest says rather than more money, time for just straight answers. you are the former deputy under secretary of defense. we are not getting that, at least as to what happened, why, who knew what, and when. what do you make of that? >>guest: they are trying to sort out the story.

the claim for more aid to egypt is just more evidence of no policy in the whole area. the obama administration has failed to lead. there is a vacuum of power there. a lot of bad guys are rushing in to fill the vacuum. the idea that we would be sending another half a billion in aid, and we have all right spent more than $2 billion in egypt already, it is crazy. they were supposed to move to a democracy, morsi has rejected free speech. it will be another islamic despot. >>neil: romney's initial response was a cairo situation before news of libya, where they were reacting presumably to the stupid film on mohammed, when, in fact, he was calling into question our embassy's initial apology which was retracted

because they claim an apology was never made but we are going back to cairo so say maybe more money is the answer. that is weird. >>guest: it is very weird. there is no question that more money is not going to do anything but pay for the guys to riot at our embassy again. this is no reason to be sending that money over there right now when the government is clearly not interested in democracy and freedom as what we connect the two. when we go back to libya and the situation this, it is very clear, it has been clear from the beginning, that was a well planned terrorist attack, i talked to self experts who tell me just the gory technical details and there is no question the terrorists planned that for days and days before the attack actually occurred. so, the administration it will is trying to sort things out. would knows what they will come up with. >>neil: i am curious, we had, could just a moment here the other day, a couple of times since all of this, saying that the temptation could be there to say no, to giving money to the

middle east, but by doing that we are cutting off our nose to spite our face and leaving moderate forces abandoned and it will really boom arang on us. what do you say? >>guest: with all respect to john mccain, that is crazy. if we have learned anything in 11 years since 9/11 we have had one case after another of trying to prop up governments that are islamist states that do not have our interests in common. they are not interested in pursuing the sail path as we are. to try to prop them up, we are thought going to bring these guys an empty we will not gem -- get them to abandon radical views and john mccain could look back at the past nine, ten, 11 years and all of the mistakes we have made. >>neil: always good to see you, sir, from washington, dc. the mug shot that congressman

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>> neil: well, at least, in one new democratic poll he is turning and trailing, but could a new ad for florida republican congressman allen west turn it all around? >> february 16, 2003. fort hood, texas. lieutenant colonel allen west just received deployment orders and prepares his men to go to war. that night, south beach, miami, patrick murphy thrown out of a club for fighting, covered in alcohol and unable to stand. murphy verbally assaults a police officer. patrick murphy was arrested and taken to jail. two men, a country in crisis. you decide. >> i'm allen west. and i approve this message. >> neil: larry sabato says it's an effective message no matter how you feel about either candidate.

we put a call in patrick murphy and yet to hear back. hope springs eternal. you argue regardless that is an effective ad? >> guest: well, neil, just look at the mug shot. there are mug shots and then there are mug shots. this was a mug shot. to the average viewer watching this ad, they take away two messages. allen west was fighting for his country, leading men in battle the same time as his democratic opponent was verbally assaulting a police officer and getting drunk and being arrested and having this particular mug shot taken. as i say, it has nothing to do with the partisanship. that district is a very competitive district. there is a democrat poll showing the democrat up and republican poll showing allen west up. it will be highly competitive. that ad, itself, is very effective. >> neil: i was wondering, i

know this was allen west won and you reminded me this is one of the districts going through a change anyway. but his opponent has been leading. not in all polls but enough polls. enough of a margin that depending who you talk to, it's beyond the margin of error. would a single ad change that dynamic? or would it add to the debate and make you think twice about the opponent regardless? >> guest: i think an ad can change a substantial number of points in a house race in particular. most people are focusing on presidents. if they're not focusing on president, they are looking at the senate contest in florida. the house races this year are well down the list for most voters. so yes, a powerful ad can change reality. but let me suggest to you, though, the polls are much more mixed in this district. this district was carried by president obama, by three

points in 2008. that suggests to me it's a highly competitive two-party district. so i don't think that polls showing west up by a lot or patrick murphy the democrat up by a lot have much credibility. this is a highly competitive race. there will be coattails depending on which one of the candidates wins the presidency. >> neil: what about florida, itself? i had governor rick scott here. you can argue the job situation could always be better but it's better than it was. they argue it's their doing and not president's doing. these are snapshots in time, at this time, they seem to be giving the benefit of the president not to republicans or in this case, mitt romney.

>> that has happened across the country but not in every state. florida, colorado, and new hampshire. especially florida and colorado are truly to-up swing states. they are close to dead even when you look at all the data. to me, that suggests that florida in particular has yet to be won. debates may have the impact. other events we can't imagine between now and november 6 will have an impact. that will of course this house race and other races in florida. >> neil: quickly on the debate and the role of the challenger, it's the challenger who benefits from this to be on the same stage and level with in this case, incumbent president. when those moments happen, they are priceless. for the challenger, what is the message? >> guest: in this case, the challenger needs to make a cohesive, credible argument against president obama.